The IRS defines adjusted gross income as “gross income minus adjustments to income.” It’s a number that is included on your federal tax form, and many states use it for their own income tax calculations. Keep reading for everything you need to know how the AGI is calculated and ways to reduce it. Not only does it affect how much you pay in taxes, but it may also be the basis for decisions about eligibility for assistance programs and loans. “People are asking you all the time for your adjusted gross income,” says Paul Joseph, an attorney and CPA with Joseph & Joseph Tax & Payroll in Williamston, Michigan. Also known as AGI, it has ramifications that extend beyond the tax season. Business & Finance Click to expand menu.Īdjusted gross income is a tax term everyone should understand.